Israeli Stock Prices Close Down in Reaction to Wall Street Plunge

October 29, 1997

JERUSALEM (Oct. 28)

As goes Wall Street, so goes Tel Aviv. This was the operative phrase after share prices on the Tel Aviv Stock Exchange dropped sharply Tuesday in a shakeup touched off by the previous day’s stock plunge on Wall Street.

The Tel Aviv exchange’s two main indexes closed the day down by just under 9 percent.

Earlier in the day, trading was automatically suspended after the blue-chip Maof Index fell by more than 8 percent. Business resumed 45 minutes later.

Some stock analysts said the slide was a temporary reaction to the record drop on Wall Street, where the Dow Jones Industrial Average dropped by more than 550 points Monday, its steepest one-day point decline.

“Clearly, this is much more in the realm of a psychological than a real economic explanation,” said Nadine Trajtenburg of Bank Hapoalim.

“If there would have been a panic, we would have seen more running out of the market into dollars. But we haven’t seen that at all. The shekel exchange rate has been relatively quiet today.”

After falling sharply against the dollar in early trading Tuesday, the shekel regained ground by the afternoon. The new rate for the U.S. dollar was put at 3.5520 shekels.

Analysts further noted that it would still take some time to see the impact of the heavy selling.

One indicator would be the performance of Israeli high-tech companies in foreign trading, primarily on the NASDAQ market.

Prime Minister Benjamin Netanyahu and Finance Minister Ya’acov Ne’eman urged the public not to panic, assuring them that the Israeli economy is strong.

The drop on the Tel Aviv exchange came a day after Monday’s announcement by the Bank of Israel that it is leaving interest rates unchanged at 13.4 percent.

Despite pressure from manufacturers, Bank of Israel Governor Jacob Frenkel has refrained from cutting interest rates, saying to do so would be inflationary.